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United Natural to Cut Retail Presence Via Shoppers Store Sale

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United Natural Foods, Inc. (UNFI - Free Report) is on track to downsize its retail presence and emerge as North America’s leading food wholesaler. In this regard, the company inked deals to divest 13 of its 43 Shoppers Food & Pharmacy (or "Shoppers") stores to three distinct grocery operators. Apart from this, the company stated that it will cease four Shoppers stores, which are anticipated to discontinue operations by the end of January 2020.

The news seems to have boosted investors’ sentiments as shares of this Zacks Rank #3 (Hold) stock rose 2.9% on Dec 6.

Shoppers’ Deals in Detail

Pertaining to the sale of these stores, each of the three agreements is anticipated to conclude between mid-December and February (2020) end. This includes plans to shut down operations at all these locations, including selling the remaining inventory and concluding the store closure process before it reopens under other banners.  

As for the other four store closures, United Natural decided not to renew the lease for three stores, and cancel the fourth one. Following these actions, the company will be left with 26 operational Shoppers stores, for which it is still looking for buyers. Notably, United Natural shuttered down 30 Shoppers in-store pharmacies earlier this year. Also, the company sold prescriptions and pharmacy inventories of these stores to Walgreens WBA and CVS.

Efforts Likely to Aid Growth

United Natural has long been keen on shedding retail assets of SUPERVALU to focus on profitable areas. Management stated that it will continue focusing on exiting its retail operations strategically, which will help speed up the business transformation. Additionally, this will help the company focus its resources on areas with better growth potential.

Well, United Natural acquired SUPERVALU in October 2018. The enhanced scale of the combined entities has provided a radical boost to the company’s performance. In fact, the buyout has been driving the top line, as witnessed in the fourth quarter of fiscal 2019.

Moreover, the merger lent a competitive edge to United Natural in the grocery space by augmenting offerings.

We note that management is on track with the integration of the SUPERVALU conventional business. In this respect, the company is refurbishing the supply-chain network to better consolidate SUPERVALU’s distribution centers. Management earlier stated that it expects net run-rate cost synergies worth more than $185 million from this buyout in the fourth year of the deal.

We expect such moves to uplift the stock that has otherwise declined 8.4% year to date against the industry’s growth of 19.9%.

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